Which of the Following Statements on Financial Leverage Is True

Multiple Choice

Which of the following statements on financial leverage is true?

A) Financial leverage has no effect on expected return to ordinary shareholders.
B) Expected return to ordinary shareholders increases because return on borrowings is expected to exceed the cost of borrowings.
C) Expected return to ordinary shareholders increases because the return on assets increases.
D) Financial leverage may have a positive or negative effect on return to ordinary shareholders.